Forget protestors. The real pressure on climate is now coming from pension funds.
In a high-profile example, an asset owner pushed back against the retreat from ESG. One of the UK’s largest pension funds, The People’s Pension, pulled £28bn from State Street.
Reviewing its responsible investment policy, the fund handed its mandate to Amundi and a portion of its assets to Invesco.
“We have chosen to prioritise sustainability, active stewardship and long-term value creation,” said Mark Condron, chair of trustees for The People’s Pension. The fund aims to “balance strong financial performance with responsible investment principles”.
Other big asset owners in the UK and the Netherlands have been threatening to make similar moves, as has Brad Lander, who oversees New York City’s giant public pension funds. Norway’s $1.8tn sovereign wealth fund, meanwhile, has warned that the market may be dramatically underestimating the threat that climate change poses to equity valuations.
The Climate-Financial Risk Convergence
This switch of mandates came as a group of 26 institutions and pension funds, from Australia to the US, $1.5tn in funds, asked asset managers to engage more actively on climate risk. The group argues climate change is a long-term financial risk, particularly for pension funds, paying out retirement incomes for decades to come. It includes Scottish Widows, the People’s Partnership and Brunel Pension Partnership.
One of the largest UK workplace pensions providers with 6mn members, the People’s Partnership, said:
“We are long-term investors,” said Leanne Clements, head of responsible investment at the People’s Partnership. “Ultimately the financial material arguments for climate change rise above short-term political challenges.”
The group aims to align all of its investments with the goal of keeping global warming below 1.5C above pre-industrial levels. It outlined its expectations, determining how managers are assessed, with threat of downgrade/withdrawal of funds.
Retreat and Realignment: A Transatlantic Divide
Research by non-profit ShareAction gives European asset managers dramatically higher scores on sustainability than US peers, particularly using shareholder votes. This “positions them advantageously to seize opportunities in terms of securing mandates from asset owners who prioritise responsible investment”.
It criticised State Street alongside BlackRock, Fidelity Investments and Vanguard for a “worrying retreat from ambition”. This as managers, together managing $23tn, collectively supported just 7% of shareholder resolutions on ESG last year.
Chief executive of the $536bn California Public Employees’ Retirement System (Calpers), Marcie Frost, said she’s “concerned”. This after the Securities and Exchange Commission signalled it would no longer defend its climate disclosure rule in court. Calpers, which manages £353bn of assets, said it would hold companies accountable for climate-related disclosures.
Modern Stewardship: Where Policy Meets Power
FRC’s new Stewardship Code 2026, was published on 3 June 2025, becoming effective 1 January 2026.
It hones its focus on creating long‑term sustainable value, and could cut excessive reporting by 20–30%. Also introducing dedicated principles for proxy advisers alongside asset owners and managers.
This comes amid a wider push by the UK government to cut financial regulation to grow the UK economy.
The Code is widely embraced across the UK asset management sector. But also by international firms and non-UK managers. The current status of 297 signatories managing £52.3 trillion in assets, makes it relevant to a broad range of firms.
Stewardship as a Force for Systemic Change for Climate risk
Pressure from asset owners reflects growing awareness that climate risks amplify social inequality, by threatening retirement security. This makes stewardship a potent tool for systemic change, social equity and climate justice.
The revised Stewardship Code empowers asset owners to hold managers and proxy advisers to account. It ties climate and social outcomes to fiduciary duty and performance, not just rhetoric.
This will likely trigger more substantive engagement. Managers must show how stewardship activities (such as engagement/voting) have influenced investment decisions or outcomes.
From NEST Pensions’ submission to the FRC consultation on the revised UK Stewardship Code (March 2025), by Ikhlas Bashir, Head of Responsible Investment at NEST:
“This shift places greater onus on asset owners, who may not have a lot of resource, to take further steps to ascertain whether their managers’ stewardship approaches are good enough or not. … asset owners may increase their requests for further ad hoc stewardship information from our fund managers, leading to less consistent and more resource‑intensive reporting.”
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Current signatories to the Stewardship Code scheduled to report in autumn are expected to do so by 31 October 2025.
